Social Advertising Faces Big Privacy Debate

Today at the OMMA Social in New York City, Seth Goldstein, founder of social media advertising network SocialMedia, announced a new service for advertisers called “Friendship Ranks.” The new service combines data related to peoples’ interactions on Facebook applications to generate more effectively targeted ads. Seth also formally announced “social banners”, a service the company has been experimenting with over the past few months.

The “social banners” are an opt-out advertising service which resides within Facebook applications. Sound familiar? The whole Facebook beacon “fiasco” (as it was coined by the press), was due to it being an opt-out service. SocialMedia has been able to figure out a way to display your friends within advertisements that are present on applications. Technically, they’ve also figured out a way to display a fair amount of this information outside of Facebook.

Two weeks ago while attending the Graphing Social Patterns East conference, one of the attendees approached me to show a page on SocialMedia.com’s website that was able to display targeted ads to me based on information they had collected. I have included a screenshot below. Initially, I chose not to write a post on the issue because I wanted to make sure I got all the facts right.

I have since reached out to people that deal with privacy at Facebook about the issue but haven’t heard back yet. I’m guessing I’ll hear something from them in the near future though. So how does SocialMedia display these targeted ads outside of Facebook? Through a collection of data via applications in combination with images obtained via user public profiles and unique cookies they can piece together who you are and who some of your friends are. This is off of Facebook.

There are a number of issues at hand and many of them are extremely complex. Let me first say that I believe that social advertising has an extremely promising future. While it has yet to be perfected, I think that one day social advertising can generate more effective ads then traditional banner (and comparable) advertising.

This area must be explored further though because the industry as a whole is entering uncharted territory and one slip up could negatively impact the entire industry. In my own experience, arriving at an external site that knows who my friends are is shocking. My guess is that the average user will also be slightly creeped out about how that information was obtained.

After dwelling on the topic of privacy and transparency for third-party ad networks for the past couple weeks I’ve come up with a number of issues. First of all, it is clear that Facebook is having a tough time monitoring third-party ad networks but they feel obligated to maintain a healthy ecosystem for these companies. It has become somewhat of a conflict of interest and Facebook will need to become more transparent about their privacy discussions with third-parties to maintain trust with their users.

Users must be aware of companies that have access to their personal information when they are installing applications. There are other ad networks which would like to mimic some of the functionality that SocialMedia offers in their “social banners” but they are hesitant to create similar offerings because this has clearly become a gray area.

The combination of publicly available information and information within Facebook through the use of automated systems becomes a really fragile subject. There is a serious need for public discussion about the issue of privacy on the Facebook platform and competing platforms before we have a disaster on our hands. The industry is walking a thin line and keeping the discussions behind closed doors could irreparably damage everybody involved.

What are your thoughts about the current state of privacy with third-party applications? How can we get the conversation about privacy started? Also, what types of privacy standards do you think are important to protect users?

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